Deal Change: BANGL Stake No Longer Part of Energy Transfer’s WTG Merger
By Sandy Segrist - Hart Energy
NGL production in Texas is following a growth trend as it recovers from COVID-19, and the BANGL Pipeline's joint venture partners want in.
Energy Transfer’s (ET) blockbuster merger with WTG Midstream shrank a bit in June with the announcement that a stake in the NGL-carrier BANGL Pipeline was no longer part of the deal.
Energy Transfer announced, through a press release on June 17, that WTG’s 20% interest in BANGL was subject to a right of first offer and would not be included in the merger. ET expects the acquisition to close in the third quarter of 2024.
Despite the change, ET remains on its “juggernaut” growth trajectory, said an analyst for RBN Energy.
BANGL is a joint venture (JV) project between WhiteWater Midstream, MPLX, Rattler Midstream and WTG. A “right of first offer” is a clause written into a partnership contract allowing the remaining owners to bid first on the stake should one partner decide to sell.
“Clearly, at least one (of the remaining owners) did make an offer since the stake is no longer part of the deal,” wrote RBN Energy’s Kristen Hays, in an analysis of the merger.
Energy Transfer has dropped the WTG purchase price accordingly, from $3.25 billion to approximately $3.18 billion. ET expects accretion of $0.04 per common unit in 2025 increasing to $0.07 per common unit in 2027, the company said in the release.
Hays said the BANGL project, which stands for “Belvieu Alternative NGL,” reflects the weakness and increasing strength of the NGL market in the 2020s, especially in Texas.
According to RBN, the original plan in 2018 was to move combined NGLs (Y-grade) from the Delaware Basin without having to stop at complexes in Mont Belvieu, Texas. The primary NGL hub in the U.S. Fractionation facilities were planned at industrial sites south of Mont Belvieu and Houston, primarily Sweeny and Texas City.
However, demand for NGLs hit a wall with the rise of COVID in 2020, shrinking the project’s scope to connect to already existing facilities. Overall Permian Basin NGL production hit 1.9 MMbbl/d in early 2020.
Since then, NGL production has recovered and is gaining steam, especially as natural gas prices have remained low.
In an April analysis, East Daley Analytics predicted U.S. NGL production in 2024 will grow by an average of 280,000 bbl/d in 2024. Nearly 70% of the growth will happen in the Permian, according to the analysis.
BANGL’s owners are now expanding the line. The Texas Railroad Commission (RRC) gave a permit to the BANGL partners to build a 250-mile, 20-inch diameter link on the line from south to southeast Texas, terminating in Sweeny. Construction is underway and expected to be completed in early 2025.
MPLX, one of the partners, is also seeking an RRC permit for a Texas City fractionator and NGL export terminal.
“While applications for permits do not necessarily lead to final investment decisions (FIDs), they indicate that MPLX and its BANGL partners remain interested in pursuing much of BANGL’s original plan beyond the pipeline currently under construction,” Hays said.
Meanwhile, Energy Transfer, along with ONEOK, Enterprise Products Partners and Targa, is one of the four biggest customers at Mont Belvieu, according to RBN. Though left out of the BANGL JV, Energy Transfer has been expanding its facilities at its massive NGL complex in Nederland, Texas, with another ship dock. ET also has a project to grow incremental refrigeration capacity at the site by 250,000 bbl/d, according to company’s website. Both projects are scheduled to be completed in 2025.
“ET’s juggernaut of growth maintains its trajectory without a piece of BANGL’s route to bypass Mont Belvieu,” Hays said.